Bear Put Spread VF Corporation With Yield Up To 234%

Bought a BPS in VFC.

music selection:  “Say You Will” — Foreigner

weigh-in:  219.2 +1.6

My first trade of 2021 follows the same theme as much of 2020. I’m limiting my risk and position size by buying spreads. I’m also doing what I can to improve my win rate by buying in the money. Finally, I’m going with big slow-moving Dividend Aristocrats that are unlikely to breach my downside protection over a two-month time frame.

VF Corporation (VFC) is a dividend aristocrat with 47 consecutive years of dividend increases. They make and market lifestyle apparel for men, women, and children, as well as footwear. The stock is slow-moving and down over the trailing twelve months. An ideal candidate for an in the money bear put spread.

With shares trading at 86.80, I bought the 92.5/97.5 strikes bear spread (10 spreads). I paid a net debit of 3.8410 per share for the spread. I used the 19FEB2021 expiry, yielding 47 days till expiration. The trade enjoys 6.57% protection against an upward move in price during that time. Should the 92.5 strike not be violated, the spread will be worth 5.00 a share 47 days from now. That is good for 1,159 in profits on 3,841 of capital at risk. The return would be 30% or 234% annualized.

I currently have 9 spreads active. Six are bear spreads and three are bull spreads I did not detail here as they were recommended to me behind a paywall. I will detail the results when the trades close. All trades are in the money with only one bull spread currently price threatened. Here’s to 2021 behind better than 2020!

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